Netflix, Inc. (NFLX) Expands US Subscriber Base, Pay-TV Declines

Netflix, Inc. (NFLX) Expands US Subscriber Base, Pay-TV Declines
NFLX Photo by Matt Perreault

Netflix, Inc. (NASDAQ:NFLX) has expanded its reach in U.S. households as the number of users who subscribed to online video services such as Netflix has increased 4%, while consumers are generally ignoring the premium pay-TV channels like HBO and Showtime.

Households opt for streaming service

Between March 2012 and August 2013, subscriptions for Pay TV channels came down by 6%, according to a report from NPD Group. In the United States, almost one-third of the subscribers paid to watch premium TV channels in August 2013. Percentage of homes that subscribed to the streaming service surged to 27%.

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The report also suggested that seven out of 10 films and TV shows were viewed through on-demand services, including subscription firms like Netflix, Inc. (NASDAQ:NFLX) and Amazon Prime instead of buying or renting from Apple’s iTunes or Wal-Mart’s Vudu.

“It’s fair to say that some of the shift that you’re seeing is probably caused by Netflix,” Russ Crupnick, a senior vice president of the NPD Group told the LA Times.

The increase in the number of U.S. household shows that the cable TV services are failing gradually because their subscriber base is dropping as a percentage of total households. Number of subscribers of Netflix, Inc. (NASDAQ:NFLX) in the U.S. touched 31.1 million towards the end of the third quarter of 2013, which was an increase of 24% from the previous year. The streaming company will post its latest quarterly figures on Wednesday.

Netflix not a replacement, but addition

Mr. Crupnick said that some of the shift may be due to the economy, when people feel after seeing their bills that they cannot afford this.  The report suggests that viewers have shifted towards on-demand services to watch films and TV shows, but they were not asked if they have dropped their cable connection or still using it.

Separately, other reports and studies noted that users have not subscribed the Netflix, Inc. (NASDAQ:NFLX) as the replacement to premium cable service, but have subscribed the service, in addition to cable services.

Showtime said that around one million subscribers, in the past year, joined its service totaling its user count at 23 million. Number of subscribers on HBO was flat to around 28 million, according to Variety.

The findings of NPD’s State of SVOD (subscription video-on-demand) are based on the survey of 7500 individuals, and analysis of 450,000 consumer transactions.

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